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Dollar’s Unchecked Rise May Cause a Chill on Investment and Place Canadian Jobs at Risk

OTTAWA, ON — The Forest Products Association of Canada (FPAC) today expressed concern over the impact of the rapid and sustained appreciation of the Canadian dollar on the forest products industry and urged Canadian governments to take steps to e…

OTTAWA, ON — The Forest Products Association of Canada (FPAC) today expressed concern over the impact of the rapid and sustained appreciation of the Canadian dollar on the forest products industry and urged Canadian governments to take steps to ensure Canada remains competitive in international markets. FPAC presented its views during its appearance before the House of Commons Standing Committee on Finance as part of its pre-budget deliberations.

Canada’s forest products industry annually exports over $40 billion worth of product to external markets. It is estimated that each penny rise in the exchange rate translates into a $507 million loss in annual sales revenue. This poses a significant threat to the over 200,000 jobs that depend on the sector’s ability to export.

“Canada’s forest products industry has, over the past decade, kept pace with the challenge of aggressive competition from abroad, remaining an export leader of high quality forest products. Despite tariff and non-tariff barriers in some markets and a punishing softwood lumber duty in the U.S. which has cost the industry over $3.4 billion (CDN), productivity growth in this sector has been among the highest in the Canadian economy, and has exceeded that of our US competitors,” said Avrim Lazar, President and CEO of FPAC. The rapidly rising Canadian dollar is another challenge that the industry has had to grapple with and has done so successfully. However, the industry is concerned that the long-term impact of the dollar’s rise has been underestimated.

The industry believes that the sustained appreciation of the dollar will have a negative impact on investment and longer-term prospects for growth. For the industry to remain a world leader and significant supplier of Canadian jobs, Canada’s forest products industry is urging governments recognize the long-term impacts and respond accordingly.

“Our industry’s ability to adapt to these challenges is but one part of the equation. As industry adapts and improves, governments have an equal responsibility to adjust in the face of a shifting global economy,” continued Lazar. “Much of our industry’s business climate is defined and controlled by governments. Governments regulate access to the industry’s most important input: trees. Government establishes competition policy thereby defining how the industry can structure itself as it tries to meet challenges such as a rising dollar. And governments regulate the industry. So while the industry can undertake measures to meet the challenge of a rapidly changing global economy, governments must also adapt the manner in which they impact industry and its policy environment.”

In its presentation to the Standing Committee on Finance, FPAC urged the Government of Canada to consider a number of policy initiatives that are key to the forest products industry’s future success. Among them were:

– that the Government take further action to reduce taxes on capital investment in the next Budget, specifically, the immediate elimination of the Large Corporation Tax and the corporate surtax;

– that the Government move forward on its Speech From the Throne commitment to modernize the Competition Act to recognize the global nature of Canadian export markets. In particular, better recognition of the global market within merger reviews would facilitate adaptation by the industry;

– that the Government renew efforts to eliminate trade barriers globally, through multilateral and bilateral efforts; and

– that the Government pursue the sectoral approach to “smart regulations”. By focusing on improving environmental performance in the context of advancing the overall competitiveness of key sectors of the Canadian economy, this initiative shows promise in moving Canada towards a truly sustainable future.

In an earlier editorial, Lazar addressed the responsibility that rests with the Canadian industry itself in terms of investment, touting a willingness to direct finances towards new technologies as a crucial albatross.

“For the longest time, remaining competitive was no more complicated than keeping up with the Jones’ by investing in the newest skidder or the latest sawmill technology. To this end, the industry certainly did its share -the industry has invested a whopping $30 billion in technology since 1990. However, in recent years, technological competitiveness has become only one part of the buying equation. As the industry’s customers and their customers become more environmentally aware each year, an increasingly important consideration for buyers is ensuring that the products they are buying come from suppliers who follow environmentally sustainable forestry practices. Placing equal, if not greater, emphasis on how the products are produced bodes well for Canadian producers. Indeed, Canada has consistently shown itself to be at least as good as if not better than most countries when it comes to sourcing fibre in an environmentally sustainable fashion,” he said.

“All told, the industry has a very good story to tell; one that positions it well in an international marketplace that is placing an increasing emphasis on the sourcing of fibre from sustainable and environmentally sound suppliers. However, the industry is also the first to acknowledge that it cannot afford to rest on its laurels. More can and will be done to continue to provide customers with the assurance that when they buy Canadian they are buying the highest quality products from a source whose environmental stewardship is second to none.”